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Fiscal Realities

New Brunswick’s Treasury Board Minister Roger Melanson says that AIMS is wrong about his province’s spending problem. In a July 26 interview with CBC Radio in Moncton, he said that New Brunswick’s economic problems arise from neglect by the federal government. Contrary to a recent column in the Telegraph-Journal by AIMS’s VP of Research John Williamson, Melanson also trumpeted his government’s plan for fiscal recovery. Through a mix of tax hikes and spending cuts, he claims that New Brunswick can balance its books by 2020.

The facts tell a different story. The federal government has actually increased transfers in recent years. (NB receives $2.74-billion in total transfers for 2016; in 2010 it received $2.49-billion.)

Compared with 2010, New Brunswick spends 11 percent more money, even though it has the same number of people. To suggest the problem is one of revenue – given the stagnation in population growth and the existing high tax burden – is absurd. There aren’t more revenue streams available under the current regime.

If New Brunswick simply reduced its growth in spending, its books could be at surplus long before 2020. Instead, ever-increasing spending growth is taken as a given, making a catch-up very difficult indeed.

Finally, it is disingenuous and misleading for Melanson to say that his government’s approach is 50-50: half revenue and half spending cuts.

Spending reductions have not only been offset by a higher HST – the government is also hiking other forms of tax. Plus, the cuts are spread out over five years, while the tax hikes are happening now. That’s not a 50-50 split, but a 20-80 (or worse). So much for balance.

Even while hiking taxes, the government is still posting deficits. The evidence supports Williamson’s argument: New Brunswick’s economic woes are caused not by federal neglect or revenue shortfalls, but by fiscal indiscipline and high spending.